From Debtor To Millionaire is a guest post from J.D. Roth, who founded the blog Get Rich Slowly in 2006 and is the author of Your Money: The Missing Manual. I first met JD in 2010 for lunch up in Portland when I was still working.
By that time, J.D. was already a mini-celebrity in the personal finance world through his story telling abilities and topical focus of paying down debt and living a more frugal lifestyle. We came from opposite ends of the financial and topical spectrum, but as fate would have it, we're in pretty similar boats now.
I admire J.D. because he is a “blogging purist” – someone who writes for the love of writing first, community second, and income a distant third. This is th way I've sought to write all my posts on Financial Samurai since 2009.
Instead of an interview, I asked J.D. to share his story of how he went from debtor living paycheck-to-paycheck to financially free in just a few short years.
In The Beginning – A Debtor
I'm a lucky man, and I know it. But for a long time, it sure didn't seem that way.
When I was a boy, my family was poor. We lived in a single-wide trailer house in rural Oregon. My father was often out of work. When he was unemployed, things were rough. We never went hungry, but sometimes we came close. More than once, we were bailed out by the kindness of other families in our church.
We didn't always struggle. Sometimes my parents had money, at least for a little while. You see, my father was a serial entrepreneur. He was always starting businesses. Even when he had a job selling boxes or staplers or candy bars, he had something going on the side. Most of his businesses failed, but some succeeded.
In 1977, my father sold one business for $300,000. He was supposed to receive $5000 per month for fifteen years, which seemed like a lot of money at the time. To celebrate, he went out and bought an airplane, a sailboat, and a Kenwood stereo. Life was good — until the buyer went bankrupt. Because he hadn't saved anything from the few payments, Dad was broke again. And unemployed. And a debtor. We were right back where we'd started.
This “famine or feast” pattern continued throughout my entire childhood. Most of the time, it was famine — not feast.
In the late 1980s, I went away to college. Because I knew my parents couldn't help me pay for school, I took care of things myself. I was a good student with a lot of extracurricular activities: president of the computer club, national competitor in Future Business Leaders of America, editor of the school literary magazine, and so on. Plus I had terrific scores on the the PSAT and SAT. As a result, I earned a full-ride scholarship. I worked two or three or five jobs to pay for housing and to earn spending money.
During college, I developed a spending habit. In order to keep up with my friends, many of whom seemed to be rich (as I defined it at the time), I used credit cards. I began to carry debt. At first, I only owed a few hundred dollars, but by the time I graduated with a psychology degree, I had a few thousand dollars in credit-card debt.
After college, my debts continued to mount. I bought a new car. When I had money, I spent it. When I didn't have money, I still spent it. By the middle of 1995, just four years after I'd graduated, I'd accumulated over $20,000 in credit-card debt. It got worse. In 2004, my consumer debt topped $35,000. I felt like I was drowning as a debtor.
Getting Rich Quickly – Goodbye Debtor Status
One night in October 2004, after I’d bounced yet another check and missed yet another payment, I reached rock bottom as a debtor. I began to wonder why I didn’t use my entrepreneurial skills at home.
I was helping to manage the family box factory, and I'd started a computer consulting firm on the side. Both businesses made money, and I made smart decisions with the profit. But at home, my money situation seemed dire.
I asked myself: What if I made decisions in my personal life as if I were making them for a business? What if I installed myself as CFO of JD, Inc? How would I cut costs? How would I increase revenue? Where were the best places for me to direct my cash flow?
That night, I drafted a three-year plan to get out of debt. I didn't want to b a debtor anymore.According to my calculations, I could pay off everything I owed by December 2007 — if I managed my money wisely. I decided to give it a shot.
I cut back on spending. I boosted my income. As JD, Inc. became profitable and my cash flow improved, I paid down debt. I tracked my spending and created monthly reports to document my progress.
Along the way, I documented my progress on my blog, Get Rich Slowly. There, I fostered an audience of like-minded people and we shared tips and tricks for getting out of debt and building wealth.
The results were remarkable.
In less than a year, I had set aside a $5,000 emergency fund with my wife and had increased my cash flow by $750 per month. I plowed that “profit” into debt- reduction. I continued to manage my life as a business, and in December 2007 — right on schedule! — I became debt-free for the first time in my adult life. No more debtor life!
But it didn't stop there.
I had started Get Rich Slowly on a lark. It had been meant to be a hobby, a place I could earn a few extra bucks while helping myself and others make smarter decisions with money.
The site quickly grew to become something much, much more. By the summer of 2007 — just a year after I'd started the blog — it was clear that this could be a full-time business. I quit my day job to write full time.
As the blog's income grew rapidly — $5,000 a month! $10,000 a month! To much, much more a month! — I began to panic. Remember how recently the creator of Flappy Bird pulled his game off the market after it began to earn $50,000 a day?
Nobody understood him. I did. I remembered the pressure I felt in 2008 and 2009. I hadn't asked for so much money or public scrutiny. I'd simply wanted to write a blog about money and not being a debtor. I was mentally unprepared for the financial success.
I was getting rich quickly, but it wasn't any fun.
I put a lot of pressure on myself to produce quality content every day — twice a day, if possible. Meanwhile, I'd grown fat. I was fifty pounds overweight.
And my marriage was struggling. (I was a dick to my wife and she wasn't very nice to me either.) And then my best friend committed suicide.
In early 2009, I decided to sell Get Rich Slowly. After entertaining a couple of quick offers, I walked away in April 2009, just three years after I'd begun. (Except that I didn't really walk away. I stuck around for another three years acting as editor and primary author. I couldn't tear myself away!)
By selling the site, I received a huge windfall. It wasn't nearly as much as some people have imagined, but it was plenty. It was enough. Coupled with the cash I'd earned over the three years of running the site, my wife and I were millionaires. The debtor life was no more.
Coping With Sudden Wealth
How did it feel going from living paycheck to paycheck as a debtor to having a million dollars in the bank? How did financial freedom change me? The answers to these questions are complex.
The first thing to understand is how fortunate I was to have experienced this windfall after getting out of debt and adopting a new financial blueprint.
If this money had fallen into my lap just five years before, I'd have effed things up. With the “famine or feast” mentality that dominated the first forty years of my life, I would have burned through the money quickly.
Instead, I was smart. Yes, I did spend some of the cash on fun things. I bought a used Mini Cooper. (My quest to purchase a Cooper had become a long-running joke at Get Rich Slowly.) I bought some nice furniture. My wife and I took a trip to Europe. We paid off our mortgage.
But mostly, I ignored the cash. We opened an account at Fidelity and funded a portfolio comprising 60% stock-market index funds and 40% municipal bonds. (This was at the bottom of the market crash, so we were very conservative. In retrospect, this would have been a great time to go 100% stocks, but I still had some learning to do.)
For many people, having a million bucks would be a license to spend. Or to retire. And at one time, it would have been the same for me. But after reading and writing about money for so long, I had a different perspective as past debtor.
My wife and I weren't profligate, but we enjoyed a comfortable adult lifestyle. We weren't willing to make many more sacrifices than we already had. As a result, I figured we had enough money in the bank to retire — at normal retirement age. But we still needed to work to cover our current expenses.
It was a tremendous relief to not have to think about the future anymore, but I still needed to focus on earning enough to cover the things I wanted to do in the near future.
More Than Money
I'd be lying if I said that becoming a millionaire didn't change me. It did change me. I'm not sure what my friends and family would say, but from my perspective, these changes have been positive. And they can be traced to one core characteristic: the ability and willingness to try new things and become somebody different.
When I was living paycheck to paycheck, I felt trapped. When I was a debtor, I felt like a slave chained to my job, my home, and my life. I couldn't do anything risky because I had to make enough to pay my creditors.
Once I repaid my debts, those chains were broken. Being a debtor sucked. I achieved a certain level of financial freedom. The more money I had in the bank, the greater that freedom became.
Eventually — when I had a large emergency fund and the blog was earning about $5,000 per month — I felt free enough to quit my day job, which was a huge relief.
Money Gave Me Confidence
As I dug out of debt and built wealth, I also found confidence. I used to be timid and afraid. For a variety of reasons, I was unwilling to try new things. But running Get Rich Slowly fostered confidence and self-esteem. Among other things:
- I joined a gym and began to eat right, which allowed me to lose fifty pounds and become fit for the first time in my adult life.
- I wrote a book called Your Money: The Missing Manual, which collected everything I'd learned about money.
- I began to travel the world. Sometimes I traveled on my own. In the past, this would have been frightening for me. Now I found it exhilarating.
- I learned to speak Spanish. To ride a motorcycle. To play guitar. And many other things.
I started to see that the primary reason I was chronically unhappy was that I lived my life trying to please others, trying to do what I thought they wanted me to do. Boy, was that dumb. No matter how hard I tried, I could rarely please the people around me. And I certainly couldn't please everyone (which was what I'd been trying to do!). Worst of all, when I tried to please others instead of pleasing myself, I was miserable.
What It Means To Be Truly Rich
“To be truly rich, regardless of his fortune or lack of it, a man must live by his own values. If those values are not personally meaningful, then no amount of money gained can hide the emptiness of life without them.” — John Paul Getty, How to Be Rich (1961)
This realization led to some difficult decisions. As I hinted at earlier in this article, my marriage had gone sour. This was largely my fault, and I own it. I effed up. I wasn't a good husband.
So that we could both be happy, I asked my wife for a divorce. We kept it as amicable as possible. (Now, nearly three years later, we've been able to retain a friendship. We're both dating new people and are much happier than before.)
This newfound confidence and courage to be true to myself didn't come from the windfall. But the windfall allowed me to take risks that otherwise might have seemed too extreme. In a very real way, financial freedom gave me personal freedom.
And you know what? I'm not the only one. Last summer, I participated in a week-long retreat in Ecuador. A group of 25 people gathered to talk about personal and financial freedom. Some of these folks were young and still had debt.
But many had achieved Financial Independence and had net worths of two or five or ten million dollars. Without fail, the folks with money said that the best part of being rich was the freedom it granted.
They didn't buy fancy cars or wear flashy clothes. In daily life, you'd never know these folks had money. They practiced what Sam calls “Stealth Wealth“. Instead, their money provided freedom. (If they did choose to lead a flashy lifestyle, they would have lost this freedom. In theory, a million bucks can fund a $40,000-per-year lifestyle indefinitely; but a $140,000-per-year lifestyle will drain the funds in a decade.)
How Much Money Is Enough?
People often ask me how much money is “enough”. There's no one answer to that question. I know being a debtor sucks. Money isn't the issue. It's expectations that define how much is enough. There are happy millionaires and there are happy people who have nothing.
Happiness is determined by the difference between what you have and what you want. If your expectations (or desires) are greater than your reality, you'll be unhappy. But if you have more than you want or need, you'll be fine. This reminds me of Dickens' Mr. Micawber, who said:
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
The challenge then is to be content with what you have. This means you have to stop comparing yourself to external measures, such as what your friends and family have, or what society says you ought to have. Who cares? Figure out what's important to you and pursue it.
To be honest, I'm happiest when I have the least: when I'm traveling. I have a backpack of things, and that's it. That's when I'm happiest.
“By wishing to be what he calls ‘up-to-date' as his friends or boon companions, many a young man mortgages his future.” — Orison Swett Marden, The Young Man Entering Business (1903)
The Stealth-Wealth Movement
The millionaires I know personally don't flaunt their wealth. They live in average homes and drive average cars. They wear average clothes and have average jobs.
Again, much of this is because maintaining a modest lifestyle allows the wealthy to keep their wealth. But part of this “Stealth Wealth” is because we Americans don't take kindly to people who have money.
Doesn't that seem crazy? We're a society built on the idea that a person can pull himself up by his bootstraps and become a millionaire. It's a part of our national mythology. But for whatever reason, when somebody actually does this, we resent their success.
I've seen this in my own life – from debtor to millionaire.
During the past decade, I've shared my progress at Get Rich Slowly. At first, readers were on my side. My struggle to get out of debt was relatable.
But the more successful I became, the less others could identify with my situation. When readers learned how much money I made from my site, they became less supportive. And when I sold the blog there were plenty of folks who found this something to condemn rather than praise. (people didn't like seeing a debtor sell out).
For myself, I've decided that I cannot judge a person for being rich. (Well, okay, sometimes I judge, but I try not to do so often.) I've communicated with many wealthy blog readers and chatted with plenty of flush folks in real life.
Most of the rich I know have built their wealth slowly, through hard work and smart choices. They don't flaunt it. They fly under the radar by intentionally choosing to act and appear average.
My point is that in most cases, you don't know how a person has achieved their lifestyle. It may be that the guy down the street with the large house and the fancy sports car financed that stuff on mountains of debt. Or it could be that he has scrimped and saved, or has worked long hours to build a business, in order to afford these things.
Love-Hate Relationship With Money
I've written before about America's love-hate relationship with wealth. You can clearly see this in the way we self-identify. Nobody wants to say they're rich.
But if you make $100,000 a year, you are rich. Not just by world standards, but by American standards. (The median household income in the U.S. between 2008 and 2012 was $53,046. Now it is $68,000 in 2021.
That means half the population earned less than that and half the population earned more.) I'd argue that if your family brings in more than $75,000 per year, you're rich. But few people seem to agree.
I'm not condemning anyone for being rich. I founded a site called Get Rich Slowly, after all, and my aim is to help people destroy debt and build wealth. To me, wealth is a noble aim, especially if it's used to improve your life — and the lives of others.
I don't believe that wealth corrupts or that it attracts bad people. (It might, however, magnify your personality; if you're already an asshole debtor, having lots of money might make you more of an asshole debtor.)
I'm not saying that every rich person deserves to be so, and I'm not saying that we should move to a socialist society. I'm just puzzled why we simultaneously love and loathe the wealthy. Is this healthy? Is it normal?
Taking the Red Pill
Instead of vilifying those who have become rich, I think more people ought to profit from listening to what they have to say. If you take the time to ask questions, they'll tell you how the got what they have — and how they keep it. They'll tell you how they think others can do the same.
From my experience, most millionaires will say that wealth comes from spending less than you earn — from saving. And extreme wealth comes from extreme saving. The greater the gap between what you earn and what you spend, the more you can save.
For some millionaires, this means earning a lot of money. For others — like my “real millionaire next door” — it means cutting costs drastically. For most, it's a balance between earning and spending.
Most people don't take this advice seriously. They don't understand just how important it is. In truth, this is the only thing you really need to know about personal finance. Do this, and you'll build wealth. And the bigger the gap between your earning and spending, the wealthier you'll become.
No More Excuses
People also like to make excuses. “That's great,” they say, “but it doesn't apply to me because of X.” I'm sorry, but it does apply to you. And as long as you make excuses as to why it doesn't or why you can't follow the advice, you're not going to get ahead. End of story. It's nothing personal. It's just math.
If you want the math to work in your favor, you have to take charge. You can't be a victim. Your situation may not be your fault, but it's your responsibility to improve it — nobody else's. (See: Why Not Just Try Harder To Get Ahead?)
Another barrier is that many folks aren't willing to make short-term sacrifices for long-term freedom. They don't understand what financial independence actually means and what it feels like. So, they numb themselves with consumption and call it good enough. They're complacent. They don't realize that if they buckled down for a few years, they could escape the entire system.
Look, it's like The Matrix. There's a pleasant pattern to our society, and it's tough to see outside of it. But trust me, there are plenty of people who have taken the red pill, who have stripped the blinders from their eyes. Once you step outside the Matrix, it's easy to see how it works, how you once were manipulated, how most people continue to be manipulated.
To escape, you've got to listen to what the quiet millionaires are whispering. Take your advice from the folks who have been successful, and not from those with flash and bling but nothing to back it up.
“Many a man is poor today, although he has worked like a slave, simply because he could not save.” — Orison Swett Marden, The Young Man Entering Business (1903)
I'll end this long article where I began it: I'm a lucky man, and I know it. I've worked hard to get what I have, but many other people have worked harder and have less. And if my windfall had occurred any earlier, I probably would have squandered the money. Instead, it came at a time when I was ready and able to be smart with money. My challenge now is to grow this nest egg.
In the meantime, I'll do what I can to keep preaching the gospel of Get Rich Slowly. Don't be a debtor any more.
Update 2024: JD first wrote this guest post in 2014 and has since reacquired GRS from the original buyers for a nice discount. That's a huge win because one you sell your baby, it's very hard, if not impossible to buy it back. However, in this low interest rate environment, you never want to sell your cash cows!
Unfortunately, JD says he only has $200,000 left and is feeling some financial stress. He says he needs to find a way to make more money from GRS.